AML regulations in Japan are underpinned by a well-established legal and supervisory framework that combines preventive controls, criminal enforcement, and asset-freezing mechanisms. Shaped by international standards and reinforced through national coordination, Japan’s approach to Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) has continued to evolve in response to emerging financial crime risks.
By 2025, supervisory attention has moved decisively beyond policy design. Regulators increasingly expect organisations to demonstrate that AML controls are effective in practice, supported by strong governance, accurate risk assessments, and consistent operational execution.
National AML/CTF Policy Coordination in Japan
Japan’s AML/CTF strategy is coordinated at the national level through the Inter-Ministerial Council for AML/CTF/CPF Policy, co-chaired by the National Police Agency (NPA) and the Ministry of Finance (MOF).
This body oversees Japan’s National AML/CTF/CPF Action Plan (FY2024–2026), which sets out priorities for legislative development, supervisory cooperation, and private-sector implementation aligned with Financial Action Task Force (FATF) standards.
Japan is a long-standing FATF member and completed its most recent mutual evaluation in 2024. While the assessment recognised notable progress, it also identified areas requiring continued improvement, particularly around supervisory consistency and the effectiveness of controls within regulated entities.
Core AML Laws and Scope of Application
Preventive AML Obligations
Preventive AML requirements are primarily established under the Act on Prevention of Transfer of Criminal Proceeds (APTCP). Under this legislation, obliged entities must:
- Verify customer identity during onboarding and relevant transactions
- Maintain customer and transaction records
- Submit Suspicious Transaction Reports (STRs) to the authorities
These obligations are reinforced by the Foreign Exchange and Foreign Trade Act (FEFTA), particularly for cross-border transactions and foreign exchange activity.
Criminal Enforcement and Proceeds of Crime
Japan’s criminal AML framework is supported by the Act on Punishment of Organised Crimes and Control of Proceeds of Crime (APOC) and the Anti-Drug Special Provisions Law, which provide for:
- Criminalisation of money laundering offences
- Confiscation and recovery of illicit proceeds
- Provisional seizure and restraint measures
Terrorism Financing and Asset Freezing
Measures addressing terrorism financing and sanctions risks include:
- The Act on Punishment of Financing to Offences of Public Intimidation
- The Terrorist Asset-Freezing Act (TAFA)
- Relevant provisions under FEFTA
Together, these frameworks enable Japan to implement targeted financial sanctions and comply with domestic and international asset-freezing obligations.
Who Must Comply with AML Regulations in Japan
AML regulations in Japan apply to a wide range of entities, including:
- Banks, insurers, securities firms, and investment managers
- Payment service providers and money service businesses
- Crypto-asset service providers registered with the Financial Services Agency (FSA)
- Certain Designated Non-Financial Businesses and Professions (DNFBPs), depending on activities
The Financial Services Agency (FSA) acts as the primary AML supervisor, issuing guidance, conducting inspections, and requiring remediation where deficiencies are identified.
Supervisory Expectations and Required AML Controls
FSA AML/CTF Guidelines
The FSA’s Guidelines for Anti-Money Laundering and Combating the Financing of Terrorism set out detailed supervisory expectations based on a risk-based approach.
Key elements include:
- Enterprise-wide AML/CTF risk assessments, reviewed regularly
- Customer risk profiling based on behaviour, geography, products, and transaction activity
- Customer Due Diligence (CDD) and transaction monitoring
- Enhanced Due Diligence (EDD) for higher-risk relationships
- Sanctions screening against domestic and international lists
- Recordkeeping and timely STR submission
In 2024, the FSA published updated FAQs to clarify practical implementation expectations and address common challenges identified during supervisory reviews.
Governance and Internal Oversight
Governance remains a central focus of AML supervision in Japan. Regulators expect organisations to demonstrate:
- Clear board-level oversight and senior management responsibility
- Appointment of designated AML/CTF officers
- Documented policies, procedures, and escalation frameworks
- Ongoing staff training and awareness programmes
- Independent testing and validation of AML controls
Supervisory assessments increasingly focus on how effectively these structures operate in practice, rather than their mere existence.
Digital Assets and Evolving Risk Areas
Japan maintains a comparatively mature regulatory framework for crypto-asset service providers, which must register with the FSA and comply with sector-specific AML requirements.
Regulatory scrutiny in this area reflects concerns around anonymity, rapid transaction velocity, and cross-border exposure. As digital innovation continues, transaction monitoring, customer identification, and third-party risk management remain key supervisory priorities.
What AML Regulations in Japan Indicate for 2026
Looking toward 2026, regulatory trends suggest Japanese authorities will:
- Place continued emphasis on effectiveness testing and validation
- Expect faster remediation of identified deficiencies
- Increase scrutiny of governance and accountability structures
- Maintain close alignment with FATF guidance and global standards
Organisations operating in or with Japan should ensure their AML frameworks remain adaptable, well-governed, and capable of withstanding supervisory review.
Conclusion
AML regulations in Japan reflect a mature regulatory environment with an increasing focus on real-world effectiveness. By 2025, compliance expectations extend beyond formal adherence to laws and guidelines, requiring demonstrable operational performance, strong governance, and consistent risk management. As organisations prepare for 2026, maintaining robust, risk-based AML frameworks will be critical to regulatory confidence and long-term market trust.
Frequently Asked Questions
1. Who oversees AML compliance in Japan?
The Financial Services Agency (FSA) is the primary AML supervisor for financial institutions in Japan, supported by national coordination involving the National Police Agency (NPA) and the Ministry of Finance (MOF).
2. Which organisations are subject to AML regulations in Japan?
AML obligations apply to banks, insurers, securities firms, payment providers, crypto-asset service providers, and certain DNFBPs, depending on their activities.
3. What are the main AML laws in Japan?
Key legislation includes the Act on Prevention of Transfer of Criminal Proceeds (APTCP), the Act on Punishment of Organised Crimes and Control of Proceeds of Crime (APOC), FEFTA, and the Terrorist Asset-Freezing Act (TAFA).
4. How does Japan manage sanctions and terrorism financing risk?
Japan implements targeted financial sanctions through domestic legislation and international commitments, requiring customer and transaction screening, asset freezing, and reporting obligations.
5. Are crypto-asset service providers regulated under Japan’s AML framework?
Yes. Crypto-asset service providers must register with the FSA and comply with AML obligations, including customer identification, transaction monitoring, and suspicious transaction reporting.
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